Illinois Tool Works (NYSE: ITW) manufactures engineered products for the industrial, construction, electronics and other markets. Illinois Tool Works follows a strategy of growth by aqcuisition, like other multi-line manufacturers such as IDEX (IEX) and AMTEK (AME). The company earned $13.9 billion in revenue and $969 million in net income in 2009.
The company's strategy of growth by acquisition, which fail a little more than half of the time, leaves it vulnerable to the risk of a mismanaged or poorly selected acquisition. The decrease in residential construction huts the company's bottom line. Illinois Tool Works competes with other industrial manufacturers such as Graco (GGG), IDEX (IEX), Dover (DOV) and Danaher (DHR).
Illinois Tool Works follows a business strategy in which the company chooses to focus on the few products that command the most sales. The company has 840 operations in 57 countries. The company's 60 operating segments are aggregated into 8 external reportable segments.
According to Sayan Chatterjee a Batten Fellow at the University of Virginia Darden School of Business, acquisitions fail more times than they succeed due to overpayment for the acquisition and/or failure to quickly and effectively integrate the acquired company into the buyers corporate structure. The Clare Ross Organization supports this assertion by claiming that less than 50% of corporate acquisitions are successful.
In general, when foreign currencies depreciate relative to the U.S. dollar, the value of Illinois Tool Works' international sales decreases. On the other hand, exchange rates resulting in a weak U.S. dollar boost the value of Illinois Tool Works' international sales.
When spending on new home construction drops, so does spending on construction equipment and supplies resulting in slowed revenue growth for Illinois Tool Works. On the other hand, when spending on new home construction increases, spending on construction supplies increases resulting in faster revenue growth for Illinois Tool Works.